December 5, 2012 -- Despite weak financial results, leading Japanese consumer electronics original equipment manufacturers (OEMs) Sony Corp. and Toshiba Corp. during the next two years are expected to increase their semiconductor spending as they invest in a wide range of innovative new products to revitalize their businesses.
Sony next year is expected to purchase $8.4 billion worth of semiconductors, up nearly 5 percent from $8.0 billion in 2012, according to an IHS Semiconductor Spend Analysis report from information and analytics provider IHS (NYSE: IHS). Company spending will rise slightly again the following year by 0.1 percent.
Meanwhile, Toshibas spending will increase 2.0 percent to $6.1 billion in 2013, up from $6.0 billion in 2012. Toshibas spending will surge by another 6.3 percent in 2014, reaching $6.5 billion, as presented in the figure below.
In contrast, spending at the other major Japanese consumer electronics OEMs, Panasonic and Sharp, will decline in 2013 and 2014with Panasonic enjoying a minor rebound of 2.4 percent in 2014.
All the Japanese consumer electronics OEMs are struggling financiallyprompting them to take measures to cut costs in order to shore up their profits, said Myson Robles-Bruce, senior analyst for semiconductor spending and design activity at IHS. But even in these grim circumstances, Sony and Toshiba remain optimistic about the future, and are taking steps to invest in innovative products. This will cause their spending on semiconductors to rise in the coming years.
2012 Brings Disaster for Japans CE Firms
The major Japanese consumer electronics manufacturers have been negatively impacted by a range of different factors this year, including economic slowdown in key markets of the world, lower demand plaguing certain product segments, and increasingly difficult competition from South Korean and Chinese rivals. According to the latest financial results, Panasonic, Sony, Toshiba and Sharp will all suffer losses this year.
As a group, the four companies will see their revenue decline by nearly 7 percent in 2012 compared to 2011.
Because of its financial difficulties, Sony has issued bonds twice this year, to raise funding. This effort comes even as the company has had its credit rating dropped to the lowest investment grade by Moodys. Sony is now in the process of eliminating 10,000 jobs by the end of its 2012 fiscal year, and it is also selling off assets such as manufacturing plants and shares in joint ventures. Sales estimates for its various products lines including televisions, cameras and gaming devices have been cut significantly for this year.
Sony Looks to the Future
However, proof that the spirit of innovation is alive and well at Sony and Toshiba was in evidence at the October 2012 CEATEC, Japans version of the Consumer Electronics Shows (CES).
Sony at CEATEC demonstrated a wide range of products including smartphones, tablets, PCs, cameras, televisions and home networking and storage equipment. Some of the highlights included the Bravia 4K liquid crystal display television (LCD TV), and new hybrid PCs, which can be utilized as either tablets or laptops.
Beyond the CEATEC show, Sony has also indicated that it is developing a new phablet handset device. The company is likewise working on its PlayStation 4 game console device, which could be released late next year.
Toshiba Moves to the Cutting Edge
At CEATEC 2012, Toshiba was also on hand to showcase its latest products, which included a 4K resolution television. Other featured products included ultrabooks and tablets. Toshiba was able to debut products in small, medium and large screen sizes. Additionally, the company introduced new REGZA HDTVs, which offer built-in DVR capability for time shifting.
Can Japan Inc. Regain Consumer Electronics Leadership?
IHS predicts Sony will bounce back with 3.7 percent revenue growth in 2013. However, Toshiba will suffer another 1 percent decline. Declines in 2013 revenue are expected at Panasonic and Sharp as well.
The question remains whether the current downturn will be a long-term trend or if these companies eventually will recover and shine once more.
The Japanese consumer electronics companies face a changed marketplace, due to the rising influence of Apple and other competitors that have redefined some of the product segments or else simply just taken away share in key areas, Robles-Bruce said. Based upon the current financial evidence, it appears as though total revenue for Sony might be higher for next year, although estimates for Toshiba actually show a slight decline.
Read More > Toshiba and Panasonic Lead OEM Semi Spend for Japan
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